This article is an overview of DataLabs by Inc42’s upcoming Annual Indian Tech Startup Funding Report, 2019 which offers a detailed analysis of the investment trends, mergers & acquisitions (M&As), startup policies and macroeconomic factors that influenced the Indian startup ecosystem from 2014-2019. Read all articles in this series
By the end of the 2010-2019 decade, the Indian startup ecosystem had hit a series of milestones in its journey to global domination — the total capital inflow (2014-2019) in Indian startups crossed at $50 Bn in 2019, while the number of deals went over the 5K mark with approximately 2,984 unique startups funded.
Startups are also grasping higher deal value with the average ticket size of funding recording its historical peak of $21 Mn in 2019, so naturally, the ecosystem is going into 2020 with great expectations.
What these milestones don’t show is that despite the emergence of several new sectors in the Indian market today compared to five years ago, if we look at the top startup sectors in India in 2018 and 2019, the same(fintech, enterprise tech and ecommerce) end up on the top of the list.
Fintech, enterprise tech, ecommerce, consumer services and healthtech have continued to dominate on the basis of the number of funding deals and count of unique startups funded. However, this stronghold is loosening as these big 5 sectors combined made 61% of the total deal count in 2019 compared to 65% share in the previous year.
Among these top five sectors, the top three have recorded more deals than the rest of the startups outside the top five combined.
Together, fintech, enterprise tech and ecommerce combined for 50% of the share of the total funding amount in 2019, and 43% of the overall deal count.
The DataLabs by Inc42 Annual Indian Tech Startup Funding Report presents a detailed analysis of all the sector-wise investment trends and also looks ahead to new and emerging sectors and sub-sectors which are likely to attract investments and innovation.Reserve Your Free Copy Now
Lending Tech Continues To Drive Fintech To The Top
With $2.6 Bn in total funding, fintech startups recorded 125 deals in 2019. The funding amount is 71% higher than 2018 whereas the deal count plunged by 9% compared to the previous year with Delhi NCR taking the lead.
Compared to the other sub-sectors in fintech, the investor confidence towards lending tech startups continued to remain high in 2019 as well, the share of lending tech startups in the total fintech deal count was 46% or 58 deals, and for unique startups funded it was 45% or 48 deals.
High investor confidence towards lending tech startup can be ascertained by large financial gaps between the MSME sector and the formal financial institutions, opening up opportunities for newer players to enter the market which has the potential to become a $1 Tn opportunity by 2023.
Funding In Enterprise Tech Records Blockbuster Rise
The proactive push of the government towards digitalisation of Indian economy, growing digital presence of the business and wider M&A opportunity in the enterprise tech sector are the catalyst fueling the growth.
With a total funding of $1.15 Bn across 114 deals in 2019, enterprise tech recorded 49% surge in total funding amount compared to 2018 whereas the deal count plunged by 10% during the same interval.
With 21.9% share in the total M&A count, enterprise tech startups recorded 23 deals, compared to 5 for fintech and 9 for ecommerce.
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Fewer Deals For Ecommerce But Higher Inflow
In ecommerce, where the funding has been towards specific niche segments such as fashion and beauty private labels, the sub-sectors such as social commerce, there has been a recovery of investor confidence.
While the deal count falling by 14% in the year might not indicate that, the fact that the capital inflow grew by 10% at $2.6 Bn indicates more maturity. The high operational cost and diminishing profit margins of traditional “inventory-based” models had taken a toll on the investor interest in recent years, but confidence in the newer ecommerce models and verticals seems to have turned around the steep decline of 36% in total funding amount between 2017 and 2018.
2020 Predictions For Startup Sectors
Overall, as per DataLabs estimate the investment activity to be more or less similar in 2020 with massive growth predicted in 2021. While unique funding deals have dropped for the fifth-straight year, there is very little volatility and plenty of stabilisation in the overall funding activity in the past two years (2017-2019).
Besides highlighting the sectors that are likely to see the most investment and innovation, the upcoming Annual Tech Startup Funding Report 2019 also dives deeper into 16+ sectors in the market and analyses which startups drove the narrative and shaped the course for the sector in 2019.Reserve Your Free Copy Now